Employment - Motion to Take Note

Part of the debate – in the House of Lords at 4:16 pm on 6th June 2019.

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Photo of Lord Willetts Lord Willetts Conservative 4:16 pm, 6th June 2019

My Lords, I begin by congratulating my noble friend Lord Leigh of Hurley on securing the debate. I particularly thank him for referring to the work of the Resolution Foundation. Several noble Lords have referred to it in the course of the debate so I had better declare an interest as its executive chair. Our work has shown not only that has there been a significant increase in employment but that this increase has been very progressive in many ways, reaching out and including in the jobs market the most marginalised and disadvantaged groups. For example, the bulk of the increase in employment has been among those in the less affluent half of households, and a third of the people moving into employment have disabilities.

This jobs recovery has also been spread broadly across the country. The increase in employment has not been concentrated in London and the south-east—far from it. In fact, the biggest proportionate increases in employment have been in South Yorkshire and Merseyside. There has also been a lot of debate about atypical work. Although it surged until about 2016, since then, as the labour market has continued to tighten, the surge has been in classic full-time employment. My noble friend Lord Leigh was right to draw attention to this excellent performance by our jobs market.

Perhaps our jobs market’s most striking feature, however, is that it is absolutely not what anyone expected; my noble friend Lord Lupton also made this point. We have just had the biggest recession since the war, with a 5% loss of GDP. We have heard from people closely involved in those tough decisions in 2010, which were necessary to bring the deficit under control, but none of us expected at the time that employment would perform so well and that pay would perform so badly. Let us face it: we are talking about a painful but inevitable trade-off. Our response to this recession has been different from that for previous recessions because pay has adjusted more and employment has adjusted less. In the decade since the economic crash, pay has increased on average by about 2.5% a year; that is basically keeping up with inflation, compared with increasing by 4.5% a year in the decade before. When faced with a choice, in so far as any policy-maker can shape this response, I suspect that most of us, whatever our political affiliation, would say—quite rationally—that a recession where the response is on pay, with pay being spread as a result of general poor performance, is better than one where the adjustment is borne by unemployment.

I speak as someone who was a policy adviser in No. 10 in the 1980s, when we had a very different type of recession—one where real pay rose for people in work, often quite considerably, but we had 10% or more trapped in severe unemployment. However—and I do not relish this—I observe that in the 1980s Governments won landslide victories, whereas in the past decade the perhaps more benign response to this deep crash seems to have been associated with a bleak, sour political mood in which more people feel more pessimistic, because their pay is not going up. I suspect that the policy combination we have ended up with, despite being one that most of us here would advocate, has not necessarily ended up working so well for the political economy and the political mood in our country.

I will venture one other observation about the political economy of this. I apologise to the House, because I will talk briefly about Brexit. I do so because a lot of Brexiteers, my Brexit friends, say to me that the performance of the jobs market—continuing to create these jobs even when there is a plan for our departure from the EU and we have all this uncertainty—shows that Brexit is not a problem. I think there is a different lesson to draw from all this.

Euroscepticism entered the bloodstream of the Conservative Party almost exactly 30 years ago when Jacques Delors went to the Trades Union Congress and said he would use the powers that Brussels held, the regulatory powers of the single market, to introduce tighter regulation on jobs. Margaret Thatcher’s Bruges speech was a response to that. After years of battling for a flexible labour market, the fear—a genuine fear—was that Brussels was going to reregulate our labour market. My view is that the performance of our jobs market in the past 10 years shows that there never was a Brussels imposition of heavy-handed regulations on the British labour market. If it ever was Delors’s plan, it never happened.

In fact, the main extra regulation on our jobs market was a domestic policy decision: the minimum wage, subsequently the national living wage. It was initially controversial; speaking in the other House when it was all introduced many years ago, I warned that I thought it would increase unemployment. We have a domestic labour market regulation, not imposed by Brussels, which fortunately has not had a deleterious effect on jobs. Instead, I think we should look forward with some anxiety—with the news today from Bridgend—at whether we are now leaving an environment where we could promote investment and R&D and be active in the new technologies of the future, driven by a misplaced fear that somehow Brussels has imposed red tape and regulation on our labour market, when what we are really celebrating today is the fact that clearly it has not.